New Home and New Car Sales During the Great Recession.
New Car Sales Soar, New Home Sales Don’t.
Low interest Rates, Easy Credit Boost New Car Sales.
New Home Sales are at Multi Decade Lows Despite Historically Low Interest Rates.
Consumers saddled with mortgage sized health insurance costs, rising food costs and car payments find it hard to buy over priced used homes, never mind even more expensive new homes.
New Car Sales Up, New Home Sales Down
After six years of quantitative easing that “ended” in October, we have been treated to media headlines touting “Recovery Recovery Recovery“, and more recently, copious use of the word “Solid“ to describe the job market, industrial output and perceived economic growth.
We have noted often that the “recovery” in reality has been in rising stock and real estate prices only. We should add the recovery also includes a rise in car sales fueld by record low interest rates and loose credit standards that enable just about anyone who wants to finance a new car to do so.
Rising Car Prices and Rising Sales
Car prices hit a record in 2014. Yet no where do we hear the media cheering on higher car prices as evidence of an “auto recovery” because cars are depreciating assets. Rather, they correctly tout rising sales. Rising sales AND rising prices, however, are evidence of an artificial market boosted by cheap credit and low credit standards. Never mind the details, if there is one piece of data that can be viewed as positive, it will be touted as evidence of something “solid” in a “recovering” economy.
Rising Home Prices, But Not New Home Sales
New home sales are at multi-decade lows during the recent housing recovery. Because prices have risen the past two years, a dearth of new home sales (and tepid existing home sales) is ignored as the media touts the “gains” in the housing market. Rising home prices are nothing to cheer about as they depress sales. Historically low interest rates have not managed to boost home sales.
Yet, the housing recovery narrative continues unbated.
Overlooked in the economic cheerleading about “job growth” is that it is entirely in part time jobs that are going predominately to those 55 years and older. Underreported is the lack of any meaningful wage growth the past few years that would enable people to pay higher home prices.
As long as the top line number job number looks “solid”, the “recovery” story remains intact.
Here are some charts that show the state of the new car and new home market:
New Home Sales 1995 – 2015: Housing Recovery?
Despite a “housing recovery”, sales of new homes are not yet close to pre Great Recession levels.
New Car Sales 1995 – 2015: Low Interest Rates and Low Credit Standards Boost Car Sales
New car sales have soared during the post Great Recession era of low interest rates and easy credit, despite rising and record high prices.
New Home Sales vs. New Car Sales 1995 – 2015
New car sales have recovered to historic levels while new home sales remain depressed.
New Home Sales 1960 – 2014: at Forty-Five Year Lows
New home sales are at the short nadirs of the 1970’s and 1980’s recessions when the population was 35% lower.
New Car Sales 1976 – 2014: Let the Good Times Roll
New car sales are benefitting for record low interest rates.
Adjusted Monetary Base 1995 – 2015
$4 Trillion CAN boost auto sales.
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Further Reading:
UPDATE November 2015: New Car Sales vs New Home Sales
Credits:
New Home Sales Charts: US. Bureau of the Census, New One Family Houses Sold: United States, retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HSN1F/, February 3, 2015.
New Car Sales Charts: US. Bureau of Economic Analysis, Light Weight Vehicle Sales: Autos & Light Trucks, retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ALTSALES/, February 3, 2015.
Further Reading:
The False Housing Recovery of 2014
The False Housing Recovery of 2013 and How it Unravelled
How a stock market crash will end the economic recovery
The Recovery Has Reversed – Welcome to the Revocery
The Housing Recovery and the Law of Small Numbers
The Dark Side Of Rising Home Prices
Why the Housing Recovery is a Farce Illustrated by Two Charts
Who Will Buy the Houses to Sustain the Housing “Recovery”
Millennials, Not Part of the Club Yet
Student Loans and Unemployment are Holding the Housing Market Back
Waiting for Household Formation
Straining to Regain Real Estate’s Promised Land
Student Loans are Holding Back the Housing Recovery
The Coming Supply/Demand Real Estate Inventory Reversal
Who Will Buy the Homes to Sustain the Housing Recovery?
How QE Encourages Stock Buy Backs, Discourages Hiring and Stunts the Housing Market
The Housing Inventory Shortage Myth
Housing Recovery and Law of Small Numbers
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